Should newspapers raise cover prices?

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Should newspapers raise cover prices?

Several regional British newspapers are tweaking their cover prices in an attempt to combat plummeting advertising profts. As news organisations shift focus from reach to revenue, is it in newspapers’ best interest to raise prices?

Con: Raising prices will shrink reader base

Last Friday, British readers reacted in outrage when Newsquest titles the Oxford Mail, the Worcester News and the South Wales Argusincreased their cover prices from 45p to 65p. The move follows a pattern for regional U.K. titles, including the Ledbury Reporter, the Malvern Gazette, the Lancashire Telegraph, the Bury Times, the Northern Echo and the Somerset County Gazette.

Despite the publisher’s assurance that the “fair” price increase means the Somerset County Gazette “will have more of pretty much everything in it from now on,” many readers vowed to boycott the paper after it raised prices from 80p to £1.20 in June, the Guardian reported.

“Times are hard for everybody at the moment and this just rubbed salt into people’s wounds,” one reader wrote on the Somerset County GazetteFacebook page. Others called the price raise “unjustifiable,” “disgusting” and “a nail in the coffin” for the newspaper.

And these strongly worded comments are not “idle threats,” the Guardian’s media commentator Roy Greenslade said. He pointed out that when Newsquest increased the Brighton Argus’ cover price from 45p to 65p on weekdays in September, sales dropped rapidly: from 21,589 copies in July to 17,106 in December.

A lower price point may encourage sales. Local World’s Derby Telegraph experimented with this concept last month by cutting the cover price from 43p to 20p for one day. On that day, 21 June, sales rose 13 percent above usual levels, according to Hold The Front Page.

“We are encouraged by the lift we experienced and will reflect on the opportunities that this might present to engage with a section of the Derby audience that is clearly very sensitive to price,” Managing Editor Steve Hallsaid.

Despite the success, the paper will move forward with its scheduled 2p price increase later this year. However, Hall said the newspaper is considering partnering with a commercial sponsor for another trial to see if the title would benefit from variable pricing. The Birmingham Mail and Manchester Evening News both have such pricing strategies, in which they give away free newspapers on certain days of the week, Hold the Front Pagereported.

Greenslade deemed price hikes “suicidal” for newspapers, adding that they “will surely antagonise readers, making it unlikely that they will return even if the rises are reversed.” He added that the chances for an significant overall revenue increase are slim, through the catastrophic effect to circulation is certain. The risk, he suggested, isn’t worth it.

Pro: Price hikes provide necessary revenues

However, research by Simon-Kucher & Partners concluded that “raising print prices may shrink [newspapers’] already anemic readership base, but may also be their best hope for staying afloat.” The report, which analyzed top newspapers’ financial statements, prices and circulation figures, found that U.S. newspapers that put up prices between 2007 and 2010 increased their circulation revenue.

As the following chart from the report illustrates, several major American newspapers have financially benefited from upping their newsstand prices. Just a quarter price increase at The Dallas Morning News led to an 11 percent circulation revenue boost.

Chart by Simon-Kucher & Partners

“It’s almost always prudent to raise prices,” the report said, shooting down the concept of cutting prices to supplement lost circulation.

The report points out that with the financial downturn, a newspaper’s least loyal, most financially-sensitive customers will have already abandoned reading the publication. The remaining customers are the most likely to pay a premium price.

Newspapers must recognize that their print strategies are simply buying enough time to make digital profitable: “The print business isn’t your legacy; it’s your bank,” the report says. Therefore, print news publications should focus on generating the highest profits possible to invest in their digital business models. The most sure way of doing so is by raising print prices, the report says.

Of course, raising print prices will likely alienate some readers and thus advertising revenues may suffer. But the report points out that in the digital age, where web advertising is worth just $10 for every $100 in print, newspapers must shift reliance from advertising revenues to circulation. The New York Times has already done this: In the second quarter of 2012, circulation generated $233 million and advertising $220 million.

Data: Price versus circulation

Of course, price isn’t the only factor that affects circulation, as the data in the following charts show (U.S. circulation figures from the Alliance for Audited Media; U.K. circulation data from the ABCs). Readers also want editorial quality, and they’re more likely to pay for a recognized brand, Greenslade noted.